US-wide carbon emissions value, broader power markets would help decarbonize: experts

US wholesale power market design changes like broadening the geographic scope of markets, adopting more granular spot market time scales and valuing clean energy attributes will be needed to accommodate higher levels of renewable energy, experts said Thursday.

The US Energy Information Administration released its Alternative Policies analysis Thursday, which considers scenarios that diverge from the reference, or business as usual, case presented in its Annual Energy Outlook released in January.

The AEO 2020 reference case assumes current laws and policies remain in place throughout the 2050 market outlook, but in areas like emissions reduction there is uncertainty around things like renewable energy tax credit extensions, fuel standard adjustments and other policies, Linda Capuano, EIA administrator, said during a Resources for the Future event in Washington that was webcast.

EIA's Alternative Policies exercise addresses some legislative uncertainty, but does not consider all possibilities, Capuano said.

The AEO 2020 reference case generally assumes existing laws and regulations remain as enacted, but in the area of policies that target emissions reduction, "history has demonstrated that there is significant uncertainty in this assumption," the Alternative Policies report said.

As a result, EIA modeled cases in which economy-wide carbon fees of $15/mt, $25/mt and $35/mt are established. The fees rise by 5%/year in real 2019 dollars during the projection period out to 2050.

"The power sector is most responsive to carbon prices," Thad Huetteman, EIA's electricity analysis team leader, said.

In a discussion on the impact of policy on US power markets, the panelists agreed that valuing clean energy attributes of power generation resources will likely be required as more renewable energy enters the power markets.

Benjamin Hobbs, director of the environment, energy, sustainability & health institute at Johns Hopkins University, said that a state-by-state carbon dioxide emissions pricing approach would be less effective than a federal one.

"You have to uniformly value carbon across the power system," Hobbs said. Maryland alone has about 50 programs to reduce carbon emissions and that's too many, he said.

SPOT MARKET FOCUS

Hobbs, who is also on the California Independent System Operator's Market Surveillance Committee, said in order to keep pace with California's 60% renewable energy by 2030 target the market's geography should be expanded and the spot market should move from hourly to 15-minute and 5-minute pricing intervals.

"If the spot market works and prices are formed in short enough intervals ... then assets can realize their full option value and we don't need separate ramp or other products," Hobbs said.

Investor-owned utility Duke Energy has a net-zero emissions by 2050 goal and the company's director of resource planning, Robert McMurry, is looking for ways to bring more wind power into its system. Potential options could include offshore wind farms or a direct current transmission line to the Midwest, he said.

What's really needed is a zero-emissions load-following resource, or ZELFR, that would not emit carbon and could be dispatched, McMurry said. Currently small modular nuclear reactors look "most promising" as it appears they can "follow load and cycle faster" than existing nuclear technology, he said.

Jennifer Macedonia, principal consultant at JLM Environmental Consulting, suggested that doing more to incentive innovation around demand response programs in the commercial and industrial space could help power sector decarbonization efforts.

Asked about the relevance of corporate emissions reduction commitments, McMurry said a lot of customers want a greener future and the investment community that drives Duke's stock value wants lower emissions goals.

"It's about risk ... if you have a high-intensity emissions portfolio over the long-term there is risk in that," he said. There is individual company risk associated high emitting resources as well.

"We've had challenges with coal ash ponds and other technologies don't bare those same risks," McMurry said.